Netflix sees Warner crowding into video market

SEC reprieve gets outweighed by newest online-streaming entrant

SAN FRANCISCO (MarketWatch) — In a perfect world, Netflix Inc. would have seen its share price rise Wednesday, what with the company and Chief Executive, Reed Hastings being cleared by the Securities and Exchange Commission of any wrongdoing when Hastings used a Facebook post last summer to announce the company’s online-streaming viewing hours for June 2012.

However, Netflix
NFLX, +2.47%
ended the day down nearly 4%, at $169.74 a share. So much for an SEC benefit.

While most of the tech sector was in the red due to broad-market weakness, some were pinning Netflix’s losses on two factors. One, originally reported by CNBC and Barron’s Tech Trader Daily, was that activist investor Carl Icahn had sold some of his 10% stake in Netflix. CNBC also reported that Icahn denied the rumor.

The other was definitely real, and pointed to the online streaming video service getting even more crowded, as Time Warner Inc.
TWX, -0.45%
launching a streaming video competitor to chip away at Netflix’s market dominance.

The new service, called Warner Archive Instant, will draw its content from the Time Warner archives of movies and TV shows. After a two-week free trial period, subscriptions will cost $9.99 a month, or $2 more than what Netflix charges for its instant-streaming service. Initially, the service is only accessible from a computer or via a Roku set-top box.

The competition between video-streaming services is only heating up more. Netflix, for example, made a big splash in February with the launch of its original series “House of Cards.” Amazon.com Inc.
AMZN, -0.11%
which offers its Amazon Prime subscribers free access to thousands of titles, soon announced a deal to be the exclusive online-streaming site for the PBS hit series “Downton Abbey.” Hulu, and its HuluPlus service also offer myriad shows that are available immediate after airing on their respective TV networks, as well as several exclusive series that are often from other countries. But …Will Time Warner’s offering matter from a competitive standpoint?

“I don’t expect this product to be successful, but it is interesting as an indication of their underlying thinking about the value of their content,” said Michael Pachter, an analyst with Wedbush Securities. Pachter is also harsh on Netflix, and has a sell rating on the company’s stock.

The Warner offerings focus on “classic” movies and TV shows.

Initially, Warner Archive Instant will have, as the company puts it, “hundreds of film and TV selections at any given time, reflecting the broad selection of content in the library,” and add more content over time to create “a consistently fresh experience with plenty of time to explore and discover.”

The Warner offerings focus on so-called “classic” movies and TV shows. Initial titles include the old “Adventures of Superman” TV series starring George Reeves as the Man of Steel, several “Best Of” collections from the show “77 Sunset Strip”, and movies such as the silent classic version of “The Scarlet Letter,” with Lillian Gish, and “The Charge of the Light Brigade” from 1936, starring Errol Flynn.

While Wedbush’s Pachter wasn’t sold on the Warner streaming option, he did say the company’s $9.99 monthly subscription fee was “interesting,” in that it may signal changes down the road in Warner’s relationship with Netflix.

Disney shuts down LucasArts

Disney has closed down the LucasArts videogame studio the company bought last year as part of its $4 billion acquisition of LucasFilm. Photo: AP

“I think the Warner pricing suggests that they really mean business, and am curious to see if Warner continues to sell its content to Netflix in the future as cheaply as it has in the past,” Pachter said.

For its Part, Netflix said in its most-recent letter to shareholders that it views itself more as a programmer of content, and not a distributor, with an eye on doing more exclusive content deals so that its approximately 33 million video-streaming subscribers can watch shows and movies with Netflix that they can’t see elsewhere.

When asked what Netflix thought about the launch of Warner Archive Instant, a spokesman summed up the company’s thoughts:

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